When sidechains were originally announced as a concept back in 2014, the technology was generally viewed as a potential death blow to the altcoin market. After all, if you’re able to move bitcoin back and forth between different blockchains, why would there be a need for separate cryptocurrencies?
With the 2017 ICO bubble still fresh in everyone’s minds, it’s clear this sidechains vision for Bitcoin has yet to be fulfilled.
While federated sidechains, such as Liquid and RSK, do exist, they come with different tradeoffs when compared to peer-to-peer (P2P) sidechains in terms of security and censorship resistance. The federated sidechains model is more similar to Ripple, Stellar, or even EOS, where the high level of centralization and lack of anonymity among validators brings into question whether the underlying tokens of these systems should even be considered true cryptocurrencies (see our recent post on this topic).
At the Understanding Bitcoin conference in Malta over the weekend, Adam Back, who is the CEO of Blockstream (the company that first popularized the sidechains concept), was asked whether sidechains are still a credible alternative to altcoins. In his response, Back covered the problems P2P sidechains have faced up to this point, where they stand today, and how they may become more secure in the future.
P2P Sidechains Difficult Due to Miner Centralization
After providing an overview of the federated sidechain model as it exists today, Back pointed to mining centralization as a key reason P2P sidechains have not seen as much traction up to this point.
“I think the other, kind of, hesitation about [the] peer-to-peer sidechain model is it has more exposure to miners,